Taxable Talk

Today is July 1st and Chicago has earned a dubious distinction. The Windy City now has the highest sales tax rate in the country, 10.25%. The old "winner," Memphis, has a 9.25% rate.

The sales tax will likely help suburban retailers of high-end items such as automobiles. Individuals contemplating a $30,000 purchase can save $900, a not insignificant amount, by shopping in DuPage County (7.25% sales tax rate) or $975 by going to Will or Lake County (7.00% sales tax rate).

People who can will vote with their spending dollars. Given the economic climate I'd hope voters in Cook County will remember who approved this increase and take out their anger at the polls. Of course, we're talking about Chicago here....

What happens if you use a payroll service and they don't forward the deposits to the IRS and your state tax department? The payroll company will be in trouble, but the employer is still liable for the deposits. That's why you should only use reputable companies.

Premier Data Solutions doesn't sound like a payroll company, but that's one of the services they offered. The company, located in Kankakee, Illinois, served a variety of employers, including the Kankakee Valley Park District, a local high school, and a pizza parlor. When the IRS notified these companies that their payroll deposits haven't been made, they contacted the Kankakee Police. Currently both local and federal investigators are looking into Premier.

Complicating the matter is that Premier was sold earlier this year and, remarkably, the payroll deposit problems apparently weren't noticed.

Joe Kristan recommended last week that employers should check with the IRS to make sure that their payroll deposits are being received. That's excellent advice. In any case I suspect lots of people are looking into whatever happened with the money Premier received but didn't remit to the government.

News Story: The Daily Journal

Congratulations, Chicago! You now have the highest sales tax rate in the country at 10.25%. Chicago earned that distinction when Cook County doubled its county sales tax to 1.75%.

Who will benefit from this tax increase? Cook County passed the tax increase to balance its budget. Of course, the idea of cutting bureaucracy didn't get considered....

The actual beneficiaries will be stores and malls located just outside of Chicago and/or Cook County. Lake County, Indiana (just over the state line and Chicago city limits) has a sales tax of 6%. The sales tax in Joliet (county seat of Will County, to the southwest of Chicago) is 7.75%. Wheaton, just to the west of Chicago, has a sales tax rate of 7.25%.

Who are the losers? Those who aren't mobile and are stuck paying the higher tax rates. Chicago businesses. Cook County businesses (the tax increase impacts the entire county). And the residents of a great American city stuck with politicians who know tax and spend all too well.

Hat Tip: Tax Prof Blog

Christopher Kelly, a former adviser to Illinois Governor Rod Blagojevich, has been indicted on federal charges of tax fraud. Mr. Kelly is accused of understating more than $1.3 million on his business and personal income tax returns. If found guilty on all counts Mr. Kelly would be looking at a significant stay at ClubFed. Three other individuals were indicted: Abdelhamid Chaib, P. Nicholas Hurtgen, and Ali Ata. Mr. Chaib and Mr. Ata are accused of fraudulently trying to obtain a $2.6 million loan to buy a chain of pizzerias; Mr. Hurtgen is accused of trying to obtain kickbacks from hospital expansion projects.

But Mr. Kelly is the big target named as part of "Operation Board Games" today. He used to be Governor Blagojevich's main adviser on gambling issues (Illinois has several casinos). So what did Mr. Kelly allegedly do? The indictment alleges that he placed wagers worth millions with both bookies in Chicago and at Las Vegas casinos and then paid the debts off with corporate funds from his roofing business as business expenses. Governor Blagojevich, according to the Chicago Tribune, selected Mr. Kelly to be his gambling adviser "...because Kelly is an avid gambler and high-roller and he often travels to Las Vegas on weekends."

While Governor Blagojevich has not been accused of any wrongdoing this is the second major indictment of one of his advisers. Earlier, Antoin "Tony" Rezko was indicted on charges of attempting to extort businesses that were involved with the Illinois Health Facilities Planning Board and the Illinois Teachers' Retirement System board. His trial will be in February.

No trial date has been set yet for the individuals indicted today.

News Stories: AP and Chicago Tribune

Back in September, I reported that Cook County was looking at increasing its sales tax. That hasn't happened yet. However, the City of Chicago decided that one good tax increase deserves another. Chicago's City Council passed a $0.05/bottle water tax and an $86 million property tax increase. Beer, wine, and liquor taxes have also been increased. The tax increases all go into effect on January 1st.

I guess politicians in Chicago have very little to fear from voters. After all, Mayor Daley was just reelected for a sixth term as mayor. Eventually, though, Chicago residents may come to the conclusion that there's another way of balancing a budget—cutting some of the bureaucracy.

I'm a native of Chicago. It's a great city, and has every kind of attraction you can think of. It's also the home to the best baseball team in the world (unfortunately, they usually don't have a good record).

But Chicago may become a much more taxing place to visit or shop. Currently, the sales tax in Cook County (Chicago and nearby suburbs) is 9.00%. That doesn't appear to be large enough to Cook County Commissioners.

Cook County Commissioner Joan Murphy told Leah Hope of WLS-TV, "We just need to do something other than cut jobs if we want to maintain services to our residents." What's the something she proposes? A sales tax increase from 9% to between 11% and 11.75%. That's somewhere between a 22.2% increase and a 30.6% increase.

Apparently, Ms. Murphy thinks the tax increase is a done deal. She told Ms. Hope, "The sales tax is going up 2 ¾ percent. That's not a back-breaking increase."

Well, a 30.6% increase may not be back-breaking, but that's a huge increase. I'm sure local businesses—especially those where individuals have options to shop elsewhere—will feel the difference. Wheaton, in nearby DuPage County, has a sales tax rate of 7.75%. A 4% difference will likely cause some shoppers to patronize other stores. Likewise, Joliet in Will County has a 7.75% rate.

The proposal must go through public hearings, and votes by the commissioners before being implemented. Needless to say, if you live in Cook County, this is something you may want to raise your voice about...or you will likely find things 30% more expensive.

News Story Here